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A Low Carbon Building Standards Strategy for Scotland (The Sullivan Report) - 2013 Update

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Costings - Recognising the value of energy efficient new buildings

In 2007 we identified that the measures we discussed could impose considerable constraints on development and recommended that costing research should be carried out in future and in partnership with industry. More recent research and experience shows that enhanced energy standards add extra capital cost which is often not paid back by reduced running costs. However, capital costs are likely to reduce as the standard becomes the norm.

We are aware of evidence that shows that energy efficiency and the savings that it offers to the building occupier is seldom valued by prospective buyers of new homes or other new buildings. In view of this, surveyors (and ultimately lenders) do not factor in the additional value of low-energy buildings in relation to running cost savings, reducing the potential for a developer to recoup their additional capital investment[8].

We offered suggestions as to why this may be:

  • People expect a new building to be energy efficient. It is a 'given' so it is difficult to promote.
  • Location is still 'king' both for new homes and commercial buildings.
  • Education is lacking on carbon emissions. There is a need to make this more of a 'currency' in the eyes of the public, and give clarity to the twin objectives of energy efficiency and low carbon in buildings.
  • Some newer technologies available to industry are often not viewed with confidence by prospective owners, warranty providers, insurers or lenders.
  • Lack of fiscal incentives and awareness, by building owners and occupiers, of benefits in return.

Citing previous work by MEARU[9] for the Scottish Government as an example, we also noted that better information to building occupiers can assist in the recognition of the benefits of low carbon living.

We discussed how the car manufacturing industry is being pushed by emissions reduction targets at a European level. Action by that industry has established a common language and terminology when marketing products. There is some frustration that this does not occur within the UK construction industry, and house building in particular, where no 'universal language' has been developed. This leads to a disconnect in marketing terms.

In 2007 we were divided in our view of the value of Energy Performance Certificates (EPCs)[10] in promoting energy efficiency and this time our position was similar.

In the commercial sector the 'Corporate Social Responsibility' aspect of an 'A band' EPC or an 'Excellent' BREEAM[11] rating is often worth more to occupants, than the savings that emerge as a result.

Some of us warned that there is a danger in awarding a building a label or a certificate, before actual performance in practice had been proven. Provision of information on modelled/calculated design performance alone, on an EPC or a sustainability label[12], is simply not enough. We consider there ought to be some type of financial incentive to 'pull' prospective buyers and occupiers towards the preference for low carbon, energy efficient buildings and the benefits they offer.

We were advised that there is currently work underway elsewhere in the UK on valuation. This work suggests that a formal mechanism to link valuation to SAP rating (for homes) would assist surveyors establish the additional value that energy efficient construction can bring. It is hoped that valuation and lending bodies would be able to buy into such a methodology in the future.

Costings - we recommend:

  • Research is carried out in partnership with the construction industry to develop a universal language for the marketing of very low carbon and very low energy buildings.
  • That Scottish Government gives consideration to introducing a financial inducement for prospective owners and occupiers that choose to own or occupy low carbon/low energy buildings, linked to either an EPC or a sustainability label.
  • That Scottish Government works with those developing valuation tools that may emerge so that they can be applied in Scotland.
  • That valuers and lenders are encouraged to recognise and make use of valuation tools that emerge.